(Updates with closing share price in the fifth paragraph.)
Sept. 29 (Bloomberg) -- Cemex SAB, the largest cement maker in the Americas, plans to sell about $1 billion of assets by the end of 2012 to reduce debt, Chief Executive Officer Lorenzo Zambrano said.
Businesses that don’t generate at least a 10 percent return on capital over time will be sold, Zambrano said in a webcast of a meeting with analysts today in New York. The company, based in the Monterrey, Mexico, suburb of San Pedro Garza Garcia, plans to sell $180 million of assets this year, he said.
Cemex, which had $17.8 billion in debt at the end of the second quarter, will meet bank covenants for 2011 and 2012 without renegotiating or selling equity, Zambrano said. The company will instead rely on asset sales, cost cuts, lower energy costs and management of working capital, he said.
“There are many things working in our favor and that’s why I’m optimistic,” Zambrano said.
Cemex rose 1 centavo, or 0.2 percent, to 4.74 pesos at 4:10 p.m. New York time in Mexico City trading.
The shares prior to today had tumbled 46 percent since the company in July reported its seventh straight net loss and said second-quarter earnings before interest, taxes, depreciation and amortization fell about 7 percent to $615 million. Analysts had speculated Cemex would need to renegotiate a covenant that required a debt-to-Ebitda ratio of 7 times or less after the ratio rose to 7.16 times for the second quarter.
The Mexican peso also weakened 13 percent since the end of June, hurting profits denominated in dollars.
Pessimism Is ‘Overdone’
Cemex had obtained a $15 billion bank loan in August 2009 to avoid default after U.S. cement demand plummeted following the company’s $14.2 billion acquisition of Rinker Group Ltd., which had more than 80 percent of sales in the U.S.
The company has identified $800 million of real estate that it plans to sell, $500 million of which will be sold by the end of 2012, Juan Pablo San Agustin, Cemex’s strategic planning chief, said during the meeting. The company expects to raise another $500 million on the sale of idle assets that don’t produce Ebitda by the end of next year, he said.
Ebitda will grow next year, Zambrano said, and U.S. operations, which have been losing money, will be profitable. For 2011, Cemex forecasts cement volume will rise 1 percent from a year ago and ready-mix concrete volume will expand 5 percent, Zambrano said.
It will take the cement market five years to recover to “mid-cycle” levels, Zambrano said. At mid-cycle, Cemex should have Ebitda of $4.5 billion to $5 billion, and the U.S. operations’ should be $1.5 billion to $1.8 billion, he said.
“Frankly, I think the pessimism in financial markets is more than a bit overdone,” Zambrano said.
--Editors: Romaine Bostick, John Lear
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